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Sunday, March 13, 2005

SBI chairman says credit growth unprecedented

The State Bank of India (SBI) is witnessing unprecedented growth in its loan book.

With the advances growth being "not normal", the largest bank in the country, is planning to raise tier II capital worth Rs 3,000-4,000 crore to support its growth.

"The credit growth we are seeing now is unprecedented and across sectors," said SBI chairman A K Purwar today on the sidelines of the annual conference organised by the Fixed Income Money Market and Derivatives Association of India (Fimmda).

The rate of credit growth till February 2005 on a year-on-year basis is 20 per cent. The rate of loan growth on the retail front (particularly home loans, consumer durables loans and personal loans) and agriculture loans is 30 per cent. The incremental credit-deposit ratio is over 100 per cent.

"The credit growth is going to be substantial in the next fiscal (2005-06) in all sectors. Therefore, the bank is exploring the option to raise capital through tier II bonds worth Rs 3,000-4,000 crore to support the credit growth," said Purwar. The SBI chairman did not indicate the time-frame in which the bonds would hit the market. The bonds are likely to have a five year maturity period.

At the same time Purwar did not rule out an equity issue. "I will not rule out the possibility of going for a public offering as the current market is very attractive," he said.

The chairman also said the bank would comply with the US-GAAP accounting norms by the end of this fiscal, which is a pre-requisite if a bank wants to go for an American depositary receipts issue.

Purwar expects the demand from the retail and the services segments to continue well into the next fiscal.

SBI in the first half of this fiscal had recorded a credit growth of 24 per cent and the chairman had then indicated that the growth rate was unsustainable.

The bank then revised upwards its credit growth target for the current year up to 18-20 per cent from 16 per cent.